Account Based Pension Minimum Drawdown Rates (2025–26)

If you have an account based pension, you must withdraw a minimum amount each financial year.

The minimum is based on your age and your account balance at 1 July.

Miss it, and the tax consequences can be significant.

If you are new to account based pensions, start here first:
Account Based Pension

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Current minimum drawdown rates (2025–26)

The minimum percentage is determined by your age on 1 July of the relevant financial year. That percentage applies for the entire year.

• Age Minimum Percentage
• Under 65 4%
• 65-74 5%
• 75-79 6%
• 80-84 7%
• 85-89 9%
• 90-94 11%
• 95 or older 14%

These rates apply for the 2025–26 financial year. There are no temporary reductions currently in place.

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How the minimum is calculated

The formula is simple.

Minimum payment = 1 July account balance × relevant age percentage

Example.

John is 68 on 1 July 2025.
His account based pension balance is $600,000.

The minimum rate for age 65–74 is 5%.

$600,000 × 5% = $30,000.

John must withdraw at least $30,000 before 30 June 2026.

He can withdraw more. There is no maximum for a standard retirement phase pension.

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What if you start the pension part way through the year?

In the first year, the minimum is calculated on a pro-rata basis.

Your age at the commencement date determines the percentage used.

The formula is:

Full annual minimum × (number of days remaining in financial year ÷ 365)

Example.

Maria starts her pension on 1 January.
Her balance at commencement is $500,000.
She is 62 at that date.

The full annual minimum at 4% would be:

$500,000 × 4% = $20,000.

There are 181 days remaining in the financial year.

Pro-rata minimum = $20,000 × (181 ÷ 365)
= $9,918 (rounded according to fund rules).

She must withdraw at least that amount before 30 June.

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What counts toward the minimum?

Regular pension payments count.

A partial commutation treated as a lump sum does not count toward the minimum annual requirement.

This is important.

If you withdraw a lump sum mid-year and assume it covers your minimum, you may accidentally fail the test.

If you are weighing lump sums versus pension payments, see:
Account Based Pension vs Lump Sum

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What happens if the minimum is not met?

If the minimum payment is not made:

• The pension is taken to have stopped for income tax purposes at the start of that financial year.
• Earnings may cease to qualify as exempt current pension income.
• Payments received may be treated as lump sums for tax purposes.

To continue receiving a retirement phase income stream, the pension may need to be commuted and restarted.

This is not something you want to fix after the fact.

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Common mistakes

A few issues come up regularly.

• Assuming a lump sum withdrawal counts toward the minimum.
• Forgetting the pro-rata rule in the first year.
• Using the wrong balance instead of the 1 July balance.
• Misunderstanding which age determines the percentage.

Small errors can create larger tax consequences.

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Why minimum rates increase with age

Minimum percentages rise as you get older.

As life expectancy shortens, the system requires faster drawdown.

At younger retirement ages, the minimum is relatively low at 4%.

At 90 and above, it rises to 11% or 14%.

This structure means:

• Early retirees retain more capital invested.
• Older retirees draw down more quickly.

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Strategy considerations

The minimum is just that. A minimum.

Withdrawing only the minimum may preserve capital longer, but it may not meet spending needs.

Withdrawing more than long term returns can reduce longevity.

Small differences compound over time.

If you want to understand how this interacts with the Age Pension tests, read:
Account Based Pension Age Pension Impact

If you are still working and considering transition strategies, see:
TTR vs Account Based Pension

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FAQs

How is the minimum drawdown calculated?

The minimum drawdown is calculated by applying the relevant age-based percentage to your account balance at 1 July each financial year. The resulting amount must be withdrawn before 30 June.

What happens if I don’t meet the minimum pension payment?

If the minimum annual payment is not made, the pension is taken to have stopped for income tax purposes at the start of that financial year. Earnings may no longer qualify as exempt current pension income.

Does a lump sum count toward the minimum?

No. A partial commutation treated as a lump sum does not count toward the minimum pension payment requirement.

Is there a maximum withdrawal?

There is no maximum withdrawal for a standard retirement phase account based pension.

Which age determines the minimum percentage?

Your age on 1 July of the financial year determines the minimum percentage that applies for that entire year. In the first year of commencement, your age at the start date is used.